U.S., Canadian Group Seeking Mutual Recognition of Rules

By Cheryl Bolen

An organization representing U.S. and Canadian business interests will be pushing strongly for “mutual recognition” of regulations as part of the upcoming renegotiation of the North American Free Trade Agreement.

Although the move toward regulatory alignment between the two major trading partners has been under way for years, enshrining a requirement in NAFTA would be a huge win for the U.S. economy and businesses in both countries, Maryscott Greenwood, CEO of the Canadian American Business Council, told Bloomberg BNA.

It also would be a huge political win for President Donald Trump in his efforts to slash regulations, potentially halving the regulatory compliance costs of businesses selling products across the border that otherwise have to meet different tests or standards for regulatory agencies in both the U.S. and Canada.

“It’s clearly a way that Canada is looking to find common ground with an administration with which they have lots of big policy differences,” Greenwood said. “This could be a win in an administration that needs to chalk up some wins,” she said.

Valuable Opportunity

The NAFTA negotiation “is a valuable opportunity to make life easier for business people on both sides of the border by cutting red tape and harmonizing regulations,” said Canadian Foreign Affairs Minister Chrystia Freeland, in an Aug. 14 speech in Ottowa.

“We share this U.S. administration’s desire to liberate our companies from needless bureaucracy, and this negotiation is a welcome chance to act on that goal,” Freeland said.

Consider a leading Ontario company like Magna, which employs 62,000 Americans, 22,000 Mexicans, and 20,000 Canadians–building auto parts and components that rely on supply chains that crisscross the borders, Freeland said.

Or an American company like Pratt & Whitney, a global leader in making aircraft engines, headquartered in Connecticut but with thousands of employees in Canada through its Canadian subsidiary.

“Just like Magna, Pratt & Whitney’s success is built on cross-border supply chains,” Freeland said. “For an engine part, there is no border,” she said.

Good for One, Good for Both

U.S.-Canada regulatory coherence is an idea that gained a lot of momentum in 2011, but the progress has been slow, Greenwood said. The two countries have been trying to speed that progress using NAFTA as the mechanism to do so, she said.

At the top of the Canadian American Business Council’s wish list for NAFTA modernization is to create a chapter on regulatory cooperation that ensures the governments work in tandem on new major rules, with a process to look back and align existing regulations.

Rather than looking at existing rules for those that can be cut, regulators can “deem” all future rules mutually recognized, so there is not a separate testing process in each country, Greenwood said. It’s essentially an agreement that if a regulation is good enough for one country, it’s good enough for both.

“You would achieve a great deal of savings in the economy and government effort if you had mutual recognition, whether it’s food safety, whether it’s manufacturing certifications, [or] whether it’s crash-testing automobiles,” she said.

Effect of Slashing Regulations

Establishing mutual recognition would have the same effect as slashing regulations, Greenwood said. Currently, a U.S.-based company seeking to sell their product into the North American market has to comply with different sets of regulations, she said.

“If the two governments said you know what, we’re going to mutually recognize each other’s regulations, then I only have to comply with one set,” Greenwood said. “It has the effect on me of slashing regulations,” she said.

To contact the reporter on this story: Cheryl Bolen in Washington at cbolen@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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